Intel Corporation (INTC)
Discount cash flow analysis
5% margin of safety What's this?
Sensitivity matrix
|
-1% |
Discount Rate % 0% |
1% |
||
|---|---|---|---|---|
| -1% | $18.08 | $17.86 | $17.64 | |
| Terminal Growth% | 0 | $18.14 | $17.92 | $17.71 |
| +1% | $18.21 | $17.99 | $17.77 |
How does a change in discount rate or terminal growth affect valuation?
This table shows the sensitivity of the valuation to two key variables - the discount rate and the terminal growth rate
Valuations and comments
- Valuecruncher created a new valuation of $22.23 (undervalued by 1.0%) - 10 hours ago
- GordonGekko created a new valuation of $22.22 (undervalued by 6.11%) - 7 days ago
- chmakar created a new valuation of $3.33 (overvalued by 84.1%) - 7 days ago
- apc1015 created a new valuation of $15.97 (overvalued by 19.67%) - 5 months ago
- apc1015 created a new valuation of $15.97 (overvalued by 19.67%) - 5 months ago
- apc1015 created a new valuation of $16.15 (overvalued by 18.76%) - 5 months ago
- tweakedmelon created a new valuation of $18.17 (overvalued by 3.3%) - 8 months ago
- SethWellbourne created a new valuation of $13.78 (overvalued by 8.13%) - 10 months ago
- SethWellbourne created a new valuation of $16.68 (undervalued by 13.32%) - 11 months ago
- afi created a new valuation of $17.58 (undervalued by 19.59%) - 1 year ago
- TheCrunchBlog created a new valuation of $17.92 (undervalued by 12.49%) - 1 year ago
- DharmaWarrior created a new valuation of $24.80 (undervalued by 33.69%) - 1 year ago
- acoy created a new valuation of $22.27 (overvalued by 2.15%) - 1 year ago
Comments
The boring details
| All amounts in millions | Figures |
| Enterprise Value: | 110,499 |
| Net Debt (Long-term borrowings less cash): | -13,241 |
| Equity Value: | 89,558 |
| Number of Shares Outstanding: | 5,622,000,000 |
| Calculated value per share: | $17.92 |
Enterprise Value is the present value of the post-tax cash flows for a business into the future.
Where:
- C1, C2, C3 - the cash flow in period 1, 2, 3, ...
- r - the discount rate
To capture the cash flows into the future a terminal value is calculated via a perpetuity calculation -
based on the final years forecast post-tax free cash flow.
Where:
- Cn - the cash flow in the final forecast period.
- LTG - the long-term growth rate
- r - the discount rate
- g - the terminal growth rate
The Capital Asset Pricing Model (CAPM) is used to determine the equity component in the discount rate.
Where:
- rt - the risk free rate
- t - the tax rate
- B - the beta of the company
- MRP - the Market Risk Premium
Valuecruncher uses an estimate of Weighted Average Cost of Capital (WACC) to determine the discount rate in the calculation.
This valuation is part of this blog post:
http://blog.valuecruncher.com/2008/10/running-the-numbers-intel-intc-trading-below-our-estimated-intrinsic-value/
Assumptions
In 2007 $INTC had revenues of US$38.3 billion and an EBITDA margin (profits) of 35.27%. Reuters aggregates 35 analysts covering $INTC and these have mean estimates of 2009 and 2010 revenues of US$39.9 and US$42.8 billion respectively. For our analysis we have used US$39.5 billion in 2008, US$41.5 billion in 2009 and US$43.0 billion in 2010. We have forecast EBITDA margins remaining flat at 35% to 2010. We have estimated capital expenditure in the US$4.95-5.35 billion range. All of these assumptions can be amended in the Valuecruncher on-line valuation model to adjust the valuation.
Other Model Assumptions:
Discount Rate: 11.0%. We believe the discount rate is in the 9-11% range. We have used the upper end of this range to reflect the deteriorating market conditions that $INTC have signalled.
Terminal Growth Rate: 3.5%. The US economy grew at an average of 3.6% over the last five-years. We have $INTC growing at around that rate in the long-term.